Energy sanctions and the global economy: mandated vs unilateral sanctions

The world is witnessing an unprecedented episode of ‘economic warfare’, with more than 30% of global GDP (the G7’s share) pitched against 11% of global energy production (Russia’s share). This paper analyzes oil sanctions against Russia. It shows that the risk of tighter sanctions backfiring, and ha...

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Bibliographic Details
Published in:International economics and economic policy 2022-05, Vol.19 (2), p.383-399
Main Author: Rühl, Christof
Format: Article
Language:English
Subjects:
Analysis
Capital assets
Coal
Commodity prices
Economic aspects
Economic development
Economic growth
Economic Policy
Economics
Economics and Finance
Energy
Energy exports & imports
Energy industry
Enforcement
Foreign exchange rates
GDP
Global economy
Gross Domestic Product
International Economics
International trade
Macroeconomics
Macroeconomics/Monetary Economics//Financial Economics
Natural gas
Natural gas reserves
Original Paper
Public Finance
Sanctions
Sanctions (International law)
Unilateralism
War
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Summary:The world is witnessing an unprecedented episode of ‘economic warfare’, with more than 30% of global GDP (the G7’s share) pitched against 11% of global energy production (Russia’s share). This paper analyzes oil sanctions against Russia. It shows that the risk of tighter sanctions backfiring, and harming the economies of the sanctioning countries, is manageable. In terms of sanction design, sanctions and embargo announcements have so far been decentralized and voluntary. In previous episodes, sanctions have been enforced, and breaching them was punished. The paper asks whether the unilateral or the mandated model will be more successful in maximizing damage to Russia’s energy revenues, while minimizing economic damage to the sanctioning alliance. Given the scale of Russia’s supplies, a gradual approach is called for. The optimal strategy uses unilateral sanction picking as long as Russian energy exports are large enough to pose a systemic threat; and sanction enforcement thereafter.
ISSN:1612-4804
1612-4812
DOI:10.1007/s10368-022-00542-9